The Leasehold Reform “ground rent” Bill aims to address the inconsistency and ambiguity of ground rents for future leaseholders.
Over one million households in the UK are sold as leasehold. Research in 2018 by the Association of Residential Lettings Agencies found 46% of leasehold house owners were unaware of the escalating ground rent when they purchased their property.
The new legislation will mean that for the first time ground rents in residential long leases would be set in law at a ‘peppercorn rent’ level (the legal term), meaning that nothing more than a literal peppercorn can be sought from leaseholders.
Freeholders that charge ground rent in contravention of the Bill could also face fines of up to £5,000.
However there will be some exemptions. Some sections of the community-led housing sector will retain the right to levy ground rent to maintain their ability to further promote community activities.
Likewise business leases where people live and work in the same premises will need to agree with their freeholder the most appropriate terms.
Although the legislation had its first reading in May no further dates have yet been scheduled to put in train the process which will eventually put it into law. It is currently at the committee stage, where the House of Lords is scrutinising the Bill.